Asking for trouble

July 05, 2004

TO SEE WHY health costs are spiraling out of control, look in the medicine cabinet.

Drug prices rise rapidly and unchecked, putting an increasingly unsustainable burden on health insurance. And how does the pharmaceutical industry spend a huge chunk of its profits? On hawking drugs to physicians and consumers in order to boost the use of expensive medicines, thus burdening the health insurance system even further.

Over more than a dozen years of heated debate in Washington, drugmakers have steadfastly resisted all encroachments on their fat profit margins, warning of dire consequences.

Without returns on investment that consistently put pharmaceutical companies among the top money-makers - currently behind only energy and financial management concerns - drug industry spokesmen say they couldn't afford to develop new products. Needless suffering and death could result.

But mounting evidence debunks that old chestnut. Most drugmakers now spend twice as much on marketing medicines as they do on research, according to The New York Times. Approximately one of every seven marketing dollars goes to advertising, and the rest goes to woo doctors and other health care professionals - sometimes with direct payoffs that have attracted the attention of federal prosecutors.

What's particularly offensive and even dangerous about this high-intensity marketing is that fueling the demand for drugs - often in cases where they aren't really needed - threatens to undermine an employer-based health care system that is already fragile and beginning to collapse.

President Bush and the Republican-led Congress have argued that drug costs for Medicare beneficiaries could be managed through competition in the marketplace. In fact, the first month's experience with the Medicare discount card program shows posting prices offered by competing drug card companies tends to drive prices down.

Shaving off a few bucks of the card companies' profits achieves little, however, when the manufacturers' prices continue to rise - as they have by more than three times the inflation rate over the past year.

Pharmaceutical industry lobbyists beat back congressional attempts last year to use government buying power to control drug costs for Medicare. But the industry's wretched excess is souring former supporters.

Three Senate committee chairmen are now among those calling for the import of cut-rate drugs from Canada, where costs are held in check by price controls.